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Justice Sues to Stop VeriFone-Hypercom Deal

By

Brent Kendall

Updated May 13, 2011 12:01 a.m. ET

WASHINGTON—The U.S. Justice Department moved Thursday to block
VeriFone Systems Inc.'s
PAY 0.22%
proposed $485 million acquisition of
Hypercom Corp.
, saying the deal would harm competition in the market for payment terminals used by retailers to accept credit and debit cards.

News of the antitrust lawsuit pushed down the companies' share price. VeriFone was off 6.7% at $46.64 and Hypercom was down 12% at $9.59, in 4 p.m. composite trading on the New York Stock Exchange.

The Justice Department said the two companies control more than 60% of the U.S. market for point-of-sale terminals used by the largest retailers.

VeriFone and Hypercom disclosed the proposed deal in November.

The companies had sought to address potential antitrust concerns by agreeing to sell Hypercom's U.S. business to Ingenico SA, the largest global provider of such terminals. The Justice Department, however, said the step was inadequate, noting that Ingenico was the only other significant competitor to VeriFone and Hypercom in the U.S. market.

"The combination of VeriFone and Hypercom would likely lead to retailers paying higher prices for POS terminals," U.S. Assistant Attorney General
Christine Varney,
head of the department's antitrust division, said in a statement. "The proposed divestiture does not resolve the significant competitive concerns posed by the merger, and in some ways exacerbates them."

The lawsuit seeks to block both the proposed merger and the related transaction with Ingenico.

If the transactions are allowed to proceed, VeriFone and Ingenico "would become so intertwined and codependent in the United States that they would operate more as affiliates than as competitors," the department said in court papers. It said the companies would become "a cooperative duopoly in full control of the sale of POS devices in the United States."

Representatives for VeriFone and Hypercom didn't immediately respond to requests for comment.